SEM’s Seven Year Itch, Part Two

First published January 18, 2007 in Mediapost’s Search Insider

There’s another controversy stirring in the SEM blogosphere, and this one is revolving around the very future of organic optimization, the yin to the paid yang of search. While this debate rears its head with predictable regularity every few years, there’s a different flavor to this one. This time, rather than an inter-industry turf war, it’s the search user that will ultimately decide the fate of SEO. And that opens up part two of SEM’s seven-year itch: what life will be like on the agency side.

A (Very) Quick History of SEM

First, a little back story. The search marketing industry has gone through one significant evolution since it began in 1996. Back then, it was a grassroots movement that started on the back of the popular search engines. More than a few have called that relationship parasitic. We worked to game the algorithmic results of Infoseek, Altavista, Lycos and Excite. We did it because there was no choice. At the time, the only way we could buy results page real estate was with terribly ineffective banners. Everybody knew that it was only the results that people looked at, and they were generating huge amounts of traffic. The higher the position, the more traffic we could expect. The organic optimization side of search has actually changed very little in the past decade. The techniques have become more sophisticated, on both sides, but it’s still all about driving listings higher for selected key phrases.

In 1998, the first reinvention of search marketing took place. Bill Gross introduced paid search through Goto, later Overture, and now Yahoo. Google followed suit in 2000. Suddenly, a whole new dimension opened up. Many moved to the paid side of search. Some remained resolutely on the organic side. And, over time, many search shops embraced both.

The introduction of paid search has been the most significant change in our industry. It has largely propelled search to where it is today. From the agency side, it demanded a whole new skill set, as we pioneered the fundamentals of bid management and, more recently, market segmentation, conversion tracking and robust testing. But one thing remained the same. Fundamentally, whether paid or free, it was still all about gaining the best real estate on the search results page.

Our Day will Come (We Hope)

Whatever side of the search marketing street we hung our shingle on, many things remained in common. We started small. We remained dedicated to search. We worked our butts off. We loved what we did. And very few of us got rich. But, we consoled ourselves, we’re part of the fastest-growing sector in marketing, and there’s got to be a payoff. We know search. Everybody searches. That’s got to be worth something. Now, many years later, we’re beginning to wonder.

The paths SEM shops chose to take have diverged over the past seven or eight years. Some have remained small, largely built around one or two skilled practitioners. Some have pursued growth and built scalable infrastructures, often fueled by eager venture capital investment trying to grab a piece of the search tidal wave. In the later case, positioning themselves for an acquisition was a common exit strategy. In a few cases this has worked, the iProspect/Isobar deal being the most notable example. In some, the inevitable stress, change of culture and diversion of focus ended up knocking the legs out from under the company. At one point, Websourced was one of the largest SEM firms in the industry. A few weeks ago, it effectively closed its doors, being absorbed into its parent, MarketSmart Interactive.

Pondering Our Future

Whatever path we chose, we’re all coming to the same crossroads. We’ve put in a lot of sweat equity, often at the expense of huge portions of our non-search lives. Unlike the early employees of the search engines (see last week’s column), we don’t have any stock options sitting in a drawer somewhere–or even the security of a regular paycheck. We’ve invested everything we have, both personally and financially, in nurturing our individual companies along, hoping that at some point, in some way, we could cash in that asset to finance the next phase of our lives, whatever that might be. Up to now, the ride has been so fun that we weren’t too concerned about getting off. But soon, we may have no choice.

The fact is, search marketing is on the cusp of reinventing itself again, and if the introduction of paid search in 1998 split the industry in half, this new incarnation will fragment it in a million pieces.

Next week, I’ll continue by exploring the next reinvention of search–and where that leaves SEM agencies.

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